Property/casualty (P/C) and life/health (L/H) insurers are key player in the capital markets, with $5.8 trillion in cash and invested assets in 2017, according to S&P Global Market Intelligence. Total P/C cash and invested assets were $1.7 trillion in 2017, and L/H cash and invested assets totaled $4.1 trillion in 2017. Most of these assets were in bonds (58 percent of P/C assets and 73 percent of L/H assets).
Because their losses are more volatile than those in the life insurance sector, P/C insurers invest largely in high-quality liquid securities, which can be sold quickly to pay claims resulting from a major hurricane, earthquake or man-made disaster such as a terrorist attack. Life insurers, whose benefit payments are more predictable, invest more heavily in corporate stocks and corporate and foreign bonds.
Insurance companies invest the premiums they collect in state and local municipal bonds, helping to fund the building of roads, schools and other public projects. They provide businesses with capital for research, expansions and other ventures through their investments in corporate equities and bonds. In 2017 alone, P/C and L/H insurers’ holdings in municipal bonds totaled $780 billion, according to the Federal Reserve.